Micro Chip Computer Corporation

Micro Chip Computer Corporation

Answer 1- Unit 2IP

The financial data of Micro Chip Computer is available from the year 2004 to 2008. The sales revenue for 2009 is based on estimation in order to find out whether the firm has been able to achieve its sales target in 2009 or not. The following table shows the annual increase or decrease in the sales growth of Micro Chip Computer Corporation.

Sales

2004

2005

2006

2007

2008

Increase or Decrease

7.80%

-23.10%

-33.11

35.70%

26.30%



The above data shows that the target set by the firm to achieve a sales growth of more than 10% is starting to achieve since 2007. From the years 2004 to 2006 it shows that the firm is in the stage of introduction period and trying to set its name in the market. The sales increase in 2007 is a major breakthrough for the firm as previously it was unable to sell its product but as in 2008 there is a slight decline in sales therefore the firm needs to adopt strategies in order to bring sustainability in its sales.

The target revenue for 2009 is 10,000 or more. The firm will be able to achieve its target because now it has entered into the growth stage and only maintaining quality, price and adopting other strategies will enable the firm to achieve its targeted revenue.

The financial information available for Micro Chip Computer is used to present the predictions for the sales and income for the company in the fiscal year 2009. The percentage sales are given for sales, cost and tax to find out the income of the firm next year. The following table shows the results:

Percentage of Sales Method

 

2008

% of Sales

2009

Sales

8,334

25%

10,418

Less: Restructuring Cost

10,418

5%

521

Profit

- 2,084 9,897

less: Tax rate

 

15%

1,484

Net Income

 

 

8,412

Answer 2- Unit DB

The financial ratios that can be calculated from the financial data of the Micro Chip Computer Corporation are: 1) Return on Asset, 2) Return on Equity, 3) Net Profit margin ration and 4) Long-term debt to Total Asset Ratio. The above four ratios are calculated for Micro Chip Computer Corporation for the year ending 2008. The following are the ratios calculated:

Financial Ratios

2008

Return on Asset

0.14

Return on Equity

0.34

Net Profit Margin

0.10

Long-term Debt to Total Asset

0.05

The above ratios are important for any stakeholders to understand because it shows the financial position of the firm, its liquidity position, its profitability and income generating activities of the firm. Therefore banks, investors and other needs to understand the financial ratios in order to take decision about a firm like whether to invest, provide loan and etc.

What do they tell you about a firm?

According to Norton and Porter (2010) return on asset shows the amount of returns earned by a firm from the investments made through short or long-term assets of a firm. It shows the ratio of firms earning against the capital provided by the different investors. The trend shows that over the years Micro Chip Computer Corporations assets are increasing which will increase confidence of the ...